Spillovers Into the German Electricity Market From the Gas, Coal, and CO2 Emissions Markets

Filippos Ioannidis, Kyriaki Kosmidou and Panayiotis Theodossiou

Journal of Futures Markets, 2025, vol. 45, issue 9, 1253-1277

Abstract: This paper investigates the mean, volatility, skewness, and kurtosis of price spillovers from the natural gas, coal, and CO2 emissions markets into the German electricity market from 2010 to July 2023, segmented into three periods: pre‐Russo‐Ukrainian war, war‐triggered price rise, and postwar adjustment. Utilizing a flexible probability model with time‐varying parameters and structural dummies for different periods and days of the week and applying the Bayesian Information Criterion (BIC) for model selection, the analysis reveals: (a) significant bidirectional mean spillovers between gas and coal markets, with coal prices exerting a stronger influence on gas prices; (b) volatility spillovers from the CO2 market into the electricity market; (c) skewness spillovers from the coal market that negatively impact electricity skewness; and (d) kurtosis spillovers from the CO2 market. The distribution of electricity price‐growth rates is characterized by extreme leptokurtosis and negative skewness, reflecting extreme price movements. These findings underscore the complex dynamics of these interconnected markets, offering valuable insights for market participants, policymakers, and risk managers in forecasting, hedging strategies, and pricing electricity derivatives during market turbulence.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/fut.22607

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:45:y:2025:i:9:p:1253-1277

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().